Exhibit (g)(34)
LETTER OF INTENT
This Letter of Intent (hereinafter referred to as "Letter of Intent" or "LOI")
shall take effect as of August 30, 2005 and is made by and between [name of
reinsurance company] (hereinafter referred to as "Reinsurer") with offices in
[city and state of reinsurance company] and IDS Life Insurance Company
(hereinafter referred to as "Ceding Company" or "IDSL") with offices in
Minneapolis, Minnesota.
WHEREAS, Reinsurer and Ceding Company desire to enter into a reinsurance
arrangement whereby Reinsurer will reinsure certain life insurance
policies issued and underwritten by Ceding Company;
WHEREAS, until such time as the parties can negotiate and execute a
reinsurance agreement covering the reinsurance transaction, the parties
desire to set forth in writing the general terms the parties have agreed
upon with respect to the reinsurance transaction; and
WHEREAS, those terms are expressed in this Letter of Intent, which the
parties intend to serve as a binding contract until such time that the
reinsurance agreement can be negotiated and executed, and which the
parties intend to serve as the basis for negotiation of the reinsurance
agreement;
NOW THEREFORE, the parties hereby agree to the terms outlined as follows:
o REINSURANCE EFFECTIVE DATE
August 30, 2005
The Reinsurer will accept backdated policies with issue dates up to six
months prior to the effective date.
o PRODUCTS COVERED
See Exhibit A
o REINSURANCE METHOD
90/10 First Dollar Quota Share YRT and [percentage] Excess of Retention
o REINSURANCE BASIS
Mortality only - YRT
1. Reinsured risk amounts will be calculated on each policy anniversary
2. During a policy year, reinsured risk amounts will be adjusted if
there is an increase or decrease in specified amount
3. Reinsured risk amount is the reinsurer's share of the policy net
amount at risk and is the basis for calculating premiums
4. Policy net amount at risk for death benefit option 1 is death
benefit less policy value(where death benefit is greater of
specified amount or policy value times tax corridor) and for option
2 is death benefit less policy value (where death benefit is
greater of specified amount plus policy value or policy value times
tax corridor)
5. Policy net amount at risk for riders is the specified amount
Cessions may be automatic, capacity facultative, or non-capacity
facultative
o REINSURANCE SHARE
Ceding Company will retain [percentage] quota share up to its maximum
retention limit
Automatic reinsurance divided among pool members
Facultative cessions on a case by case basis
Ceding Company has the right to increase per life retention limits
(retained percentage share and/or per life maximum) for new business at
any time upon 90 days advanced written notice.
o PREMIUM TAXES
Not reimbursed
o UNDERWRITING REQUIREMENTS
The Reinsurer will automatically accept its share of mortality risk on
the above-referenced policies and riders provided that:
1. the Ceding Company keeps its retention as described in this LOI,
and
2. the Ceding Company applies its normal underwriting guidelines and
manual, age and amount requirements as provided to the Reinsurer,
and
3. the sum of all amounts in force and applied for on the life with
the Ceding Company, excluding amounts being internally replaced,
does not exceed the Automatic Binding Limits set forth in this LOI,
and
Page 2 of 14
VUL IV Plus/ES
IDSL - [redacted]
4. the amount of life insurance in force in all companies, including
any coverage to be replaced plus the amount currently applied for
on that life in all companies, does not exceed the Jumbo Limit
stated in this LOI, and
5. the application is on a life that has not been submitted
facultatively to the Reinsurer or any other reinsurer within the
last two (2) years, including the current application, unless the
reason for any prior facultative submission was solely for capacity
that may now be accommodated within the terms of this LOI.
It is understood and agreed that Reinsurer will generally accept IDSL's
underwriting decisions so long as IDSL's underwriters act in good faith
and in a manner substantially consistent with IDSL's underwriting
guidelines and manual, age and amount requirements and control
procedures, thus allowing for the application of reasonable underwriting
judgment (which involves the application of positive and negative
underwriting factors or considerations), and for unintentional mistakes
provided that such mistakes are not material or systemic or part of a
pattern that evidences disregard for the Company's underwriting and
procedural requirements.
o INTERNAL REPLACEMENTS
A policy issued as an internal exchange or replacement of another policy
(whether or not the original policy was reinsured under this Agreement),
and underwritten by the Ceding Company in accordance with its
underwriting guidelines, standards and procedures for exchanges and
replacements, will be treated and covered as new business under this
Agreement (notwithstanding that suicide and contestability periods may be
applied from the date of the replaced or exchanged policy for coverage up
to the face amount of the replaced or exchanged policy in accordance with
the Ceding Company's exchange guidelines). Reinsurance of any such policy
may be ceded automatically or facultatively under this Agreement
according to the same terms and conditions as apply to other new
business. Reinsurance premium rates will be based on the issue age, issue
date, and underwriting classification of the new policy.
If a policy reinsured under this Agreement is internally exchanged or
replaced with another policy, reinsurance will continue under this
Agreement or, if applicable, any different agreement between the parties
providing reinsurance coverage for the new policy. In that event,
reinsurance premium rates will be based on issue age and duration of the
original policy and on the underwriting classification of the new policy.
Notwithstanding the foregoing, if there is a reinsurance agreement
between the parties providing reinsurance coverage for the new policy and
such agreement treats the policy as new business, then the issue age,
duration, and underwriting classification shall be based on the new
policy.
o CONVERSIONS
Contractual term conversions from Ceding Company's term insurance
policies or riders (such as an Other Insured Rider or Children's
Insurance Rider) to a policy reinsured under
Page 3 of 14
VUL IV Plus/ES
IDSL - [redacted]
this Agreement will be covered and treated the same as any other new
business under this Agreement except the issue age and issue date of the
original term policy or rider shall apply for purposes of determining
reinsurance premium rates and Reinsurer's share, if any, shall be as
provided in any reinsurance agreement that covered the original term
policy or rider. Notwithstanding the foregoing, contractual term
conversions from term insurance policies or riders less than one year old
at time of conversion and which were not reinsured facultatively will be
reinsured as new business under this Agreement based on issue age, issue
date, and underwriting classification of the new policy. In any event,
contractual conversions for purposes of this paragraph shall not include
any increase in the amount ceded to Reinsurer nor any improvement in
underwriting classification, which instead shall be handled as described
in the following paragraph.
In the event a term insurance policyholder seeks to convert to a policy
reinsured under this Agreement and at the same time increase the face
value or specified amount of the policy, or improve the underwriting
classification, if the exchange is agreed to by the Ceding Company, such
exchange shall be treated as an internal replacement and handled in the
manner set forth in the first paragraph of the foregoing section relating
to internal replacements.
In the event of a contractual conversion of an Other Insured Rider that
is issued in connection with a policy reinsured under this Agreement,
such conversion shall be treated as an internal replacement and handled
in the manner set forth in the second paragraph of the foregoing section
relating to internal replacements.
o TRANSITION
Following introduction of the VUL IV Plus and VUL IV Plus - ES plans in
any given state, a policy issued on existing IDSL life plans may be
returned for a policy on the new plans without requiring additional
underwriting evidence, if the policy owner's request for the new policy
is made within the original policy's free-look period. For purposes of
this paragraph, the free-look period administered by IDSL will be 30
days. The underwriting class may be improved in this event only if the
insured fully qualifies for the new class based on the underwriting
evidence submitted for the original application. The new policy shall be
treated as new business under this Agreement reinsured automatically or
facultatively, as applicable, subject to the terms herein.
o MAXIMUM MORTALITY FOR AUTOMATIC REINSURANCE
Each individual risk must not exceed Table P or its equivalent on a flat
extra premium basis.
o RESIDENCE & MAXIMUM ISSUE AGE REQUIREMENTS FOR AUTOMATIC REINSURANCE
Ceding Company may automatically cede risk on (i) any insureds who are
not international clients or (ii) any international clients who meet the
criteria listed in the Ceding Company's
Page 4 of 14
VUL IV Plus/ES
IDSL - [redacted]
"Guidelines for Underwriting International Clients" which has been
reviewed and approved by the Reinsurer.
o CEDING COMPANY'S MAXIMUM RETENTION LIMIT
----------------------------------------
Issue Age Retention
----------------------------------------
[ages] [dollar amount]
----------------------------------------
[ages] [dollar amount]
----------------------------------------
1. The per life retention limit shall apply to all of Ceding
Company's policies other than VUL III; and
2. Any excess over the retention limit will be ceded
automatically in accordance with the terms of this LOI unless
the Ceding Company seeks facultative coverage for the
applicable policy.
o POOL BINDING LIMIT
------------------------------------------------------------------------
Issue Age Standard - Table D Table E - H Table I - P
------------------------------------------------------------------------
[ages] [dollar amount] [dollar amount] [dollar amount]
------------------------------------------------------------------------
[ages] [dollar amount] [dollar amount] [dollar amount]
------------------------------------------------------------------------
[ages] [dollar amount] [dollar amount] [dollar amount]
------------------------------------------------------------------------
1. The Ceding Company may not cede reinsurance automatically if
the sum of all amounts inforce and applied for on the same
life with the Ceding Company, excluding amounts being
replaced, exceed the binding limits set forth herein.
2. There is no minimum for automatic cessions.
3. Potential AIBR increases are not subject to the binding and
jumbo limits and may be ceded automatically if the base
policy is ceded automatically.
4. If an applicant has existing joint coverage with the Ceding
Company, the full face amount of the joint policy will be
applied against the binding and jumbo limits.
o CONDITIONAL RECEIPT POOL BINDING LIMIT
With respect to conditional receipts in connection with applications
taken by the Ceding Company, the Reinsurer's liability will not exceed
its proportionate share of (a) [dollar amount], or (b) [dollar amount] if
the amount is ordered by a court of competent jurisdiction or the result
of a settlement with the applicant.
Page 5 of 14
VUL IV Plus/ES
IDSL - [redacted]
o JUMBO LIMIT
----------------------------------------
Issue Age Jumbo Limit
----------------------------------------
[ages] [dollar amount]
----------------------------------------
[ages] [dollar amount]
----------------------------------------
Jumbo is defined as inforce and applied for, before replacement.
o MINIMUM FACULTATIVE CESSION
Reinsurer may choose not to provide a facultative quote if the proposed
policy face amount is under [dollar amount] if under age 70 (under
[dollar amount] if age 70 or over). However, Reinsurer will honor any
facultative offer made, and any subsequent reduction in proposed or
actual face amount will not affect the validity of a facultative offer
made by or facultative coverage placed with the Reinsurer.
o CLAIMS REQUIREMENTS
Upon receiving a notice of claim on a policy, Ceding Company will provide
the Reinsurer with a Notice of Reinsurance Claim. The Notice of
Reinsurance Claim will include the insured's name and date of birth, the
policy number, the policy issue date, the Specified Amount, the risk
amount reinsured with the Reinsurer, and the cause and date of death.
For (i) all non-contestable claims whether facultative or automatic and
(ii) all contestable claims covered by automatic reinsurance with a total
death benefit less than or equal to [dollar amount], the Ceding Company
will review and settle such claims without prior approval from or
consultation with the Reinsurer.
For (i) all contestable claims covered by automatic reinsurance with
total death benefits exceeding [dollar amount], (ii) all contestable
claims covered by facultative reinsurance regardless of amount, and (iii)
all claims (whether contestable or non-contestable) in excess of [dollar
amount] in which the death of the insured occurred in a country other
than the United States (including territories and possessions) or Canada,
the Ceding Company will send the Reinsurer full underwriting and claims
investigation information prior to payment or admission of liability. The
Ceding Company will wait at least 5 business days for the Reinsurer's
recommendations before admitting liability or proceeding to settle the
claim. Reinsurer may request up to an additional ten days.
Reinsurer's failure to provide a recommendation within 5 business days
(or any agreed upon extension) shall be deemed acceptance of any action
taken by the Ceding Company. In any event, the ultimate authority to pay
or deny a claim will rest solely with the Ceding Company. Failure to
follow the Reinsurer's recommendation will not relieve the Reinsurer of
its reinsurance liability hereunder. The Ceding Company's contractual
liability for policies reinsured under this LOI is binding on the
Reinsurer, provided that the claim was paid in good faith and the
company's standard practices were followed in the adjudication of
Page 6 of 14
VUL IV Plus/ES
IDSL - [redacted]
the claim. Any required consultation will not impair the Ceding Company's
freedom to determine the proper action on the claim.
Notwithstanding the foregoing, the Reinsurer retains the right upon
reasonable notice to request and receive claim papers or any other such
reasonable documentation on any claim for audit purposes. Payment of
claims shall not be delayed pending any claim audit. Claims shall be paid
promptly upon submission of a proper proof of reinsurance claim subject
to the other provisions in this "Claims Requirements" section. Death
benefit payments will be made in a single sum, regardless of the Ceding
Company's settlement options.
The Ceding Company will promptly advise the Reinsurer of its intention to
contest, compromise, or litigate any claim involving a reinsured policy.
In that event, the Ceding Company will also promptly and fully disclose
to the Reinsurer all relevant claim documentation. Once notified, the
Reinsurer will have five (5) business days to notify the Ceding Company
in writing of its decision to accept participation in the contest,
compromise, or litigation.
If the Reinsurer does not accept participation in such contest,
compromise, or litigation, the Reinsurer must then fulfill its obligation
by paying the Ceding Company its full share of reinsurance and will not
share in any subsequent reduction or increase in liability arising out of
or in connection with the claim. If the Reinsurer accepts participation,
the Reinsurer will share proportionately in any resulting reduction or
increase arising out of or in connection with the claim. The Ceding
Company will keep the Reinsurer apprised of all significant developments
in the claim investigation, including notification of any legal
proceedings against it in response to a denial of a claim. If litigation
has commenced or claimant has made a demand for an amount exceeding the
contract benefits, the Reinsurer may discharge its liability only by
tendering payment of reinsurance proceeds to the Ceding Company in an
amount proportionate to a pending settlement offer made by the claimant
to the Ceding Company.
Reinsurer's liability for claims shall include its proportionate share of
any interest the Ceding Company must pay on death proceeds through the
date of settlement. Reinsurer shall also pay its share of non-routine
claim investigation and legal expenses in connection with the
investigation, settlement, or litigation of claims unless it has already
discharged its liability in the manner mentioned above. The Reinsurer
will not reimburse the Ceding Company for routine claim and
administration expenses, including the Ceding Company's home office
expenses and any legal expenses other than third party expenses incurred
by the Ceding Company. Claim investigation expenses do not include
expenses incurred by the Ceding Company as a result of a dispute or
contest arising out of conflicting claims of entitlement to policy
proceeds or benefits.
The Reinsurer will not participate in punitive damages or compensatory
damages ("extra contractual obligations") that are awarded against the
Ceding Company as a result of an act, omission, or course of conduct
committed solely by the Ceding Company, its agents, or representatives in
connection with claims covered under this LOI.
Page 7 of 14
VUL IV Plus/ES
IDSL - [redacted]
However, the parties recognize that circumstances may arise in which
equity would require the Reinsurer, to the extent permitted by law, to
share proportionately in extra contractual obligations. Such
circumstances are difficult to define in advance but would generally be
those situations in which the Reinsurer, in writing, recommended,
consented to, or ratified the act or course of conduct of the Ceding
Company that ultimately resulted in the assessment of extra contractual
obligations. In those situations, the Reinsurer shall be responsible for
paying its proportionate share of the extra contractual obligations.
o ADMINISTRATION
Self-Administered
o REPORTING MEDIA
Reporting requirements will be as mutually agreed upon by the parties.
Monthly transaction reports will include:
o New Business
o First Year - Other than New Business
o Renewal Year
o Changes and Terminations
o Accounting Information
Quarterly Periodic Reports will include:
o Statutory Reserve Information
o Policy Exhibit Information
o Inforce
o RECAPTURE
Except in the case of insolvency of the Reinsurer and except as provided
in the YRT Rate Guarantee provisions herein, covered policies will not
automatically be eligible for recapture, whether due to an increase in
the Ceding Company's retention or otherwise, unless otherwise agreed upon
in writing by the parties. The Reinsurer will consider the Ceding
Company's request for recapture contingent upon the development of
mutually agreeable terms.
o TERMINATION
This agreement will be unlimited in its duration and with respect to
existing business will remain inforce until termination or expiry of the
covered policies or until termination for nonpayment of reinsurance
premiums.
Either the Ceding Company or the Reinsurer may terminate the reinsurance
agreement with respect to new business by giving ninety (90) days'
written notice by certified or registered
Page 8 of 14
VUL IV Plus/ES
IDSL - [redacted]
The foregoing notwithstanding, in the event Ceding Company increases cost
of insurance rates for existing business, Reinsurer may raise reinsurance
premium rates at the same time and up to the same percentage, in which
case Ceding Company shall not be afforded the right of recapture as
described in the foregoing paragraph. Under such circumstances, however,
if the Reinsurer proposes to raise reinsurance premium rates by a higher
percentage than the Ceding Company's proposed increase in cost of
insurance rates, then Ceding Company shall have the right to recapture
reinsured business to the same extent provided for in the foregoing
paragraph. In the event Ceding Company gives written notice of its intent
to raise cost of insurance rates for the reinsured business, Reinsurer
shall have sixty (60) days to notify Ceding Company in writing of its
intent to raise reinsurance premium rates, and if applicable, Ceding
Company shall be allowed sixty (60) days from the date of receiving
Reinsurer's rate increase notice in which to elect its option to
recapture. Reinsurer's rate increase or Ceding Company's recapture shall
take effect on the anniversary of each policy covered by this Agreement
following the aforementioned sixty (60) day notice period.
In any event, the maximum reinsurance premium rates which may be charged
by the Reinsurer shall be the statutory valuation premiums for yearly
renewable term insurance at the maximum interest rates and minimum
mortality rates applicable to the reinsured policies for each year of
issue as prescribed by law.
o CONFIDENTIALITY
The Reinsurer will protect Ceding Company's customer and proprietary
information and will comply with all applicable state and federal privacy
laws.
o ERRORS AND OMISSIONS
If through unintentional error, oversight, omission, or misunderstanding
(collectively referred to as "errors"), the Reinsurer or the Ceding
Company fails to comply with the terms of this Agreement and if, upon
discovery of the error by either party, the other is promptly notified
and corrective action is promptly taken, each thereupon will be restored
to the position it would have occupied if the error had not occurred,
including interest. It is understood, however, that interest will not be
included when routine underpayments or overpayments of reinsurance
premiums are discovered and promptly corrected according to the terms of
this Agreement.
If it is not possible to restore each party to the position it would have
occupied but for the error, the parties will endeavor in good faith to
promptly resolve the situation in a manner that is fair and reasonable,
and most closely approximates the intent of the parties as evidenced by
this Agreement.
The provision will apply only to oversights, misunderstandings, or
clerical errors relating to the administration of reinsurance covered by
this Agreement.
Page 10 of 14
VUL IV Plus/ES
IDSL - [redacted]
However, the Reinsurer will not provide reinsurance for policies that do
not satisfy the parameters of this Agreement, nor will the Reinsurer be
responsible for grossly negligent or deliberate acts in administration by
the Ceding Company. If either party discovers that the other party has
failed to cede or accept reinsurance as provided in this Agreement, or
failed to comply with its reporting requirements, the party at fault may
be requested to audit its records for similar errors and to take the
actions necessary to rectify the situation and avoid similar errors in
the future.
o GENERAL PROVISIONS
Reinsurance Agreement. Reinsurer and Ceding Company agree to execute a
reinsurance agreement or amendment which will cover the business
specified above. The reinsurance agreement will include the following
provisions as mutually agreed upon by the Ceding Company and the
Reinsurer: Credit for Reinsurance, Good Faith (changes in business
practices), Arbitration, Insolvency, Entire Agreement and Amendment,
Extra-Contractual Damages, Errors and Omissions, Inspection of Records,
OF AC Compliance, Offset, DAC Tax, Misrepresentation or Suicide,
Misstatement of Age or Sex, Non-Transferability, Dispute Resolution, and
Confidentiality.
Term. This Letter of Intent shall begin as of the effective date set
forth above and shall run continuously until the date on which the
reinsurance agreement has been executed by both parties, or until
terminated in writing by mutual agreement of the parties.
Authorization. Each party shall proceed to obtain all corporate approvals
and authorizations that it deems necessary to allow it to enter into the
reinsurance agreement.
Assignment. This Letter of Intent may not be assigned without the express
written consent of the non-assigning party and shall be binding on both
parties' successors, heirs and permitted assigns.
Choice of Law. This Letter of Intent shall be governed by and construed
in accordance with the laws of the State of Minnesota.
Page 11 of 14
VUL IV Plus/ES
IDSL - [redacted]
IN WITNESS WHEREOF, Reinsurer and Ceding Company have executed this
Letter of Intent reflecting their mutual agreement to the terms and
conditions specified herein.
[name] [name of reinsurance company]
By: /s/ Xxxxxxx X. Xxxxxxxx By: [signature]
----------------------- (signature)
(signature)
Xxxxxxx X. Xxxxxxxx [name]
(print or type name) (print or type name)
Title: President Title: [title]
Date: 9/12/05 Date: 8/30/05
Location: Minneapolis, MN Location: [city and state of
reinsurance company]
Attest: /s/ Xxxxxxx X. Xxxxxxxx Attest: [signature]
----------------------- (signature)
(signature)
Title: Reinsurance Officer Title: [title]
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
REINSURER'S POOL SHARE: [PERCENTAGE]
ANTICIPATED DATE OF FIRST REPORTING: OCTOBER 31, 2005
--------------------------------------------------------------------------------
Page 12 of 14
VUL IV Plus/ES
IDSL - [redacted]
EXHIBIT A
Specifications
o PRODUCT(S) REINSURED
VUL IV Plus; VULIV Plus - ES
o AUTOMATIC REINSURANCE PREMIUMS
YRT reinsurance rates per $1000 net amount at risk are expressed in the
following table as a percentage of the 2001 VBT ALB as modified by the
Ceding Company to be attached to the treaty:
------------------------------------------------------------------------------------
Band l Band 2
($50,000-$99,000) ($100,000+)
------------------------------------------------------------------------------------
Durations 1+ Durations 1+
------------------------------------------------------------------------------------
[ages] [ages] [ages] [ages]
------------------------------------------------------------------------------------
Super Preferred NT [percentage] [percentage] [percentage] [percentage]
------------------------------------------------------------------------------------
Preferred NT [percentage] [percentage] [percentage] [percentage]
------------------------------------------------------------------------------------
Standard NT [percentage] [percentage] [percentage] [percentage]
------------------------------------------------------------------------------------
Preferred TB [percentage] [percentage] [percentage] [percentage]
------------------------------------------------------------------------------------
Standard TB [percentage] [percentage] [percentage] [percentage]
------------------------------------------------------------------------------------
Reinsurance premiums for substandard table ratings are an additional
[percentage] per table of the base plan rates.
Flat extra premiums are reinsured at the Ceding Company's flat extra
premium rates:
TERM OF FLAT EXTRA FIRST YEAR ALLOWANCE RENEWAL YEARS ALLOWANCE
------------------ -------------------- -----------------------
More than 5 Years [percentage] [percentage]
5 Years or Less [percentage] [percentage]
o FACULTATIVE REINSURANCE PREMIUMS
Facultative reinsurance premiums are the same as the automatic
reinsurance premiums specified above.
o RIDER(S) REINSURED
Other Insured Rider (OIR)
Automatic Increasing Benefit Rider (AIBR)
Page 13 of 14
VUL IV Plus/ES
IDSL - [redacted]
Base Insured Rider (BIR)
Exchange of Insured Rider (EOI)
o RIDER(S) NOT REINSURED
Waiver of Monthly Deduction Rider
Children's Insurance Rider
Accidental Death Benefit Rider
Accelerated Benefit Rider (the Ceding Company will treat any payments
under the Accelerated Benefit Rider as a lien and recover reinsurance
upon death of the insured)
o AGE BASIS
ALB
o PREMIUM PAYMENT MODE
Annually in advance
Page 14 of 14
VUL IV Plus/ES
IDSL - [redacted]
